Blog Posts by Aaron Task

Friday's CPI data is going to make it harder for Ben Bernanke to argue inflation is "transitory."

Headline CPI rose 0.5% and is now up 2.7% on a year-over-year basis, the fastest pace since December 2009. Core CPI ticked up just 0.1% in March but is up 1.2% on an annual basis, double its all-time low from October.

Despite today's data, and separate reports of rising inflation in China and Europe, Bernanke is right to resist the temptation to tighten policy, says David Levy, chairman of the Jerome Levy Forecasting Center.

"It's still fair to say we're in the midst of a dis-inflationary not an inflationary trend," Levy says. "If wages are not growing very fast — and they're growing more and more slowly — then the ability of people to pay those process is simply not there."

In a report that got less attention than CPI but is arguably more important, the Labor Department reported Friday that average hourly earnings fell 0.6% in March, the biggest drop since June 2009. On a year-over-year

Goldman Sachs has a lot of friends in high places, including many former Goldman execs. But the company has also made a few enemies along the way to becoming arguably the most powerful firm on Wall Street, including the Chairman and Ranking Republican on the Senate Permanent Subcommittee on Investigations.

"In my judgment, Goldman clearly misled their clients and they misled the Congress," Sen. Carl Levin (D-MI) said yesterday as he and Sen. Tom Coburn (R-OK.) released a two-year study on the financial crisis and its cause.

Generally speaking, Sen. Levin has accused Goldman of selling clients mortgage-backed securities (MBS) while at the same time holding a "huge short" position in the MBS market in 2007. "They gained at the expense of their clients, and they used abusive practices to do it," he said.

In a statement, Goldman denied any wrongdoing; still, its shares were down 2.4% in recent trading vs. a 0.8% decline for its peer group, as measured by the Financial Select SPDR (XLF).

With millions of Americans underwater on their mortgages and facing foreclosure, loan modifications have emerged as a potential solution to the housing crisis. But the push to modify loans has also provide new opportunities for con artists, according to fair housing advocates.

"All those people who did unconscionable things to people with the subprime and predatory lending…they're making their living now in these mortgage modification scams," says Shanna Smith, CEO of the National Fair Housing Alliance (NFHA), a consortium of more than 220 private, non‐profit fair housing organizations.

A recent investigation by the NFHA and three sister organizations found the loan modification industry as being "rife with corrupt practices."

Among the findings:

• 55% required an upfront fee to start work.
• 43% guaranteed or promised they could secure a loan modification before reviewing documents.
• 24% advised or encouraged homeowners to stop making their mortgage payments or to stop contacting their

Ahead of his deficit speech Wednesday afternoon, the White House says President Obama will "borrow from" his own deficit reduction panel, which proposed to cut about $4 trillion from the national deficit by 2020.

There's a lot of talk on cable news (real and fake) about who "won" the 2011 budget showdown.

Grover Norquist, president of Americans for Tax Reform, says the answer is crystal clear: Republicans won and President Obama and the Democrats lost.

"It's compromise when you move in the direction you want to go to but not as far as you like," Norquist says. "It's losing when you move in the direction away from [where] you wish to be."

Agreeing to $38 billion in spending cuts vs. the original goal of $60 billion "was a compromise for the Republicans and the Tea Party movement, but it was progress," Norquist tells Dan and me in the accompanying clip. "The goal was not to have a shutdown. The goal was to keep on track to reduce spending from what Obama wanted."

The GOP will have another bite at the proverbial apple - and Norquist predicts more victories -- when it comes time to vote on the 2012 budget and a separate but related vote on the debt ceiling.

Norquist predicts the debt ceiling will

With the budget deal reached Friday night, D.C. politicians averted a government shutdown and set the stage for bigger battles to come over the 2012 budget and a vote on the debt ceiling.

On Wednesday, President Obama is slated to unveil his 2012 budget, which is expected to include:

• Higher taxes for wealthy Americans, defined as those making over $250,000 per year.
• Steep cuts in defense spending.
• Reform of Medicare, Medicaid and Social Security.

Updated from 1:30 p.m. EDT

Update: After hitting a new multi-year high of 12,450 Friday morning, the Dow was tumbling in the final hour. In recent trading, the index was down 0.6% to 12,339 and on track for a modest weekly loss.

Earlier: Stocks held near multi-year highs this week, pretty much ignoring the contentious budget battle in Washington, rising oil prices, rate hikes in Europe and China, more chatter about Fed tightening…and just about everything else.

"We've entered stupid town in terms of the rally," our Breakout colleague Jeff Macke tells Henry and me in the accompanying video. "None of this stuff matters until it does and then it's going to matter in a big hurry. Until then, just be long and try not to think."

Indeed, the market has confounded those who've tried to "out-think" the rally since March 2009. It hasn't paid to fret about any number of potential negative developments, including Europe's debt crisis, which reared its ugly head again this week as Portugal was

After the passage of financial reform last year, President Obama and Fed Chairman Ben Bernanke declared the "resolution authority" in Dodd-Frank would eliminate the need for future bailouts.

Richmond Fed President Jeffrey Lacker deviated from the party line Thursday, suggesting big banks remain 'too big to fail' -- or at least believe they're too big to fail, which may lead them to take excessive risks again.

"The precedents set by intervention during this most recent crisis led to a significant increase in the scope of the safety net," Lacker said. "It is not clear that recent reforms have succeeded at closing the gap or liming the safety net."

In addition to expanding the safety net and reinforcing the notion of "too big to fail", the 2008 bailouts resulted in an even greater concentration of risk in the financial system as, most notably, JP Morgan absorbed Bear Stearns and Washington Mutual; Bank of America took over Countrywide and Merrill Lynch; and Wells Fargo took over